Things to ponder when buying a house

Something I have been watching recently has been the housing market. 
Here is my criteria when it comes to a purchasing a house:

The house must be affordable.  You can’t have the plan of getting rid of the house in 2-5 years.  The market may drop again and you need to make sure that you can afford the mortgage no matter how long you will be in it for.  If you have stretch to buy the house or are relying on two incomes to buy it then I would pass on it.

The Rate must be locked. Get a 15 year fixed or 30 year loan for the house.  Sometimes people do the interest only because they think they will get rid of it fast.  Before they know it they were in the house for 10-15 years just paying interest on the loan.  If it was fixed the house would have had some principal paid off on it.

Put 20% Down.  Investment or not you must put this amount down into your house.  This will allow you to avoid mortgage insurance and get you the best rates available from lenders.  I am sure people out there disagree with this but this is my opinion.

Location. Is this where you want to live?  Are you okay with the commute to work and other places?

A mortgage is not your only bill. Not only will a mortgage be your biggest bill but many people have to remember they have car payments, insurance, HOA fees, electric, cell phone, cable, food, and many more. So after you have all those bills can you still afford it?

Last minute double check.  Once you think you have found a place you want to buy do a final market analysis with your agent to see what else is out there in the same area for the price you are willing to pay.  You might find a better bang for the buck.

There are many more things to consider but these are a good start in the process of getting a new home.

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One response to this post.

  1. Posted by Sandy on June 11, 2008 at 2:04 am

    I like that you brought attention to total housing costs. Just because someone can afford the mortgage doesn’t mean that they can also afford everything else associated with owning a home. A good rule of thumb is to make sure all of your housing costs (mortgage, utilities, taxes, insurance, utilities, phone and maintenance) are no more than 38% of your spendable income.

    This is a neat calculator that will tell you how much interest you will save by paying extra on your mortgage every month: http://www.crown.org/Tools/Calculators/Mortgage_PrePayment.asp

    Reply

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